Illegal Immigration: History's Greatest Wage Suppression Tool

When I was a kid I used to pray for the snowy days of winter. When the other kids were dreaming of a day free from the drudgery of school and the fun of sledding and snowmen, I was thinking of making money. Cold, hard cash from crumpled hands would fill my pockets as I worked the neighborhood trying to service as many neighbors or “clients” that I could.

Maybe some of the other former young entrepreneurs out there can relate to this quirk–I actually took the time to individually press my hard-earned fortune using the family iron so that all the bills would lie neatly and crisply in my Velcro wallet. I was a businessman like my dad. I provided a service at an agreed-upon price which was beneficial to all involved, and it was wonderful.

Today’s job market is radically different. Gone are the days of the local fast food restaurants and landscaping companies staffed by pimply-faced teens hoping to save for their first car. Children whose fathers have lost their jobs to outsourcing are now themselves competing against in-sourced labor. Invading armies of illegal immigrants who are dotting the landscape of America have surreptitiously been allowed to cross over into our borders. This has been, and continues to be, the largest cause of wage suppression in the country.

Let’s take a minute so I can clearly state where I stand on this matter before a whole group of political hacks twist and distort what I’m saying. It is my opinion that legal immigration is one of the greatest assets of this country–it is one of our Golden Goose advantages that has blessed our nation from its inception and continues to shower us with dividends too numerous to list.

If I lived in just about 99% of the other countries of the world, I would be doing all I could to move my entire family to our shores; I believe that these United States are the best place to live a life of Liberty. But I would do it legally. The process we have in place for legal immigration is in serious need of significant reform, but as a whole, should not be tossed to the wayside just because millions of people decided to skirt the process and immigrate illegally.

In the ongoing debate over illegal immigration, many of those in favor of the current amnesty plan lack the fundamental understanding of how simple supply and demand works. Their starry eyes are filled with Utopian visions in which the country can digest just about any number of immigrants without its affecting the overall balance of the country’s labor pool. They’re WRONG. The greatest tragedy of their logic is that the very people they claim to be the advocates of (the poor, the uneducated and the downtrodden) are the very members of society who will bear the full brunt of this half-baked proposal.

The illegal immigration problem has grown in proportion to the growth of the welfare state. Years ago, Milton Freedman remarked on how “you can’t have free immigration and a welfare state.” The fundamental reason is that the wages one pays to an illegal immigrant mask the true cost to the existing labor pool. In essence, illegal immigrants suppress wages for existing workers while burdening the already straining social safety nets.

Ask yourself, “In what direction has the average hourly earnings of production and nonsupervisory employees wages (blue collar labor) been going over the last 40 years?” The existing surplus of low-skilled workers even had democratic-socialist Senator Sen. Bernie Sanders (I-VT)say that, “At a time when nearly fourteen percent of Americans do not have a full-time job, and when the middle class is working longer hours for lower wages, I oppose a massive increase in temporary guest worker programs that will allow large corporations to import hundreds of thousands of blue-collar and white-collar workers from overseas.”

Bernie can’t go all the way and call out all of the existing illegals, as it would most likely tarnish his image, but if even those like him on the far left can see the inherent dangers of these policies to the middle and lower classes, you know this has to be a serious problem. You just can’t bring in immigrant (primarily illegal) workers faster than you can create jobs without its destroying the very fabric of our society.

Evidence of this deliberate wage suppression policy is evident, in my opinion, by the continued failure to effectively secure the borders and deal with the millions of illegals currently living here. You cannot hide twelve million people! If illegals were a state of their own, it would be bigger than all but the top six. This failure appears conscious and deliberate to keep the status quo; there are too many advantages for those in power to maintain a permanent underclass. Unfortunately, this class of people can be (and are) used as pawns in the power struggles of politics and business at the expense of the average citizen.

The very notion that in today’s day and age that borders cannot be secured is beyond contempt. Meanwhile, your grandmother is getting cavity-searched by the TSA and yet another anchor baby is born in a U.S. hospital (which accounts for 8% of all births). The average American knows this “look the other way” policy very well, with all of its repercussions, because he has been dealing with suppressed wages for decades. This suppression has not only helped gut lower and middle-class Americans, it has also caused millions of Americans to rely on government subsidies, i.e. welfare checks, section 8 housing, and EBT cards.

Even with illegal immigration’s chilling wage-wake, why are so many in favor of it? Well, for businesses it is easy; more labor available will help them maintain and even lower existing hourly pay. The greater the supply (both legal and illegal) of workers, the greater the profit margins. With unofficial U6 unemployment totaling over 20 million people, allowing even more people into the country will only make it harder for the bottom to find a permanent position in an already over-crowded job market. As for the political 1% crowd’s support of these amnesty plans, the answer is more insidious; it helps control the effects of inflation.

As the U.S. has continued to rack up mind-numbing debt loads in the trillions of dollars, the risk of an inflationary move up in interest rates would most likely plunge the Federal government into a sea of red ink it could never hope to repay. Inflation would expose the decades of manipulation and outright lying that has been fed to the public by elected officials and government bureaucrats who have been selling Keynesian “hopium” to the masses.

These economic solutions were nothing more than monetary manipulations since we dropped the Bretton Woods agreement on August 15, 1971, and adopted a fiat money system. Wages in a free market would have an upward pressure in response to these actions, and because of this, it is to the advantage of large players (big government and business) to counter this force by adding supply to the job market by selectively not enforcing existing immigration laws. It is not a hard equation to understand; more workers equal lower wages, with the number of existing jobs being constant.

The downward force on wages, and the decreasing cost of capital by Fed manipulation, has lead to a widening wealth gap. With wages being flat, those with capital at their disposal will find themselves at the top of the food chain because labor is not their sole source of income. Those without access to capital are fighting a losing war if their weapon of choice is to work harder. For example, a doctor can only do so many surgeries a day, while an asset can grow exponentially. Once we began our fiat experiment, the divergence between productivity (capital) and labor began; this is why there have been so many calls for raising the minimum wage and the fight over right-to-work states. Rather than cut off the supply of in-sourced illegal and now H1B legal labor, the addition of more attempted fixes doesn’t speak to the heart of the problem.

Maybe, hopefully, at some point in the future we will wake up to what has really been going on in the labor market. Manipulation is not a free market. Manipulation distorts the invisible hand of the marketplace and has been the tool of special interests and social engineering utopians throughout history. In the past, the limitations on government restricted the degree of damage it could do to the man on the street, but with the consolidation of corporate and political power over the last half-century, the battles will only become more difficult.

Next time you’re sitting around the dinner table, perhaps over the holidays, be sure and remember to bring up the good ol’ days when entry level jobs were once held by young Americans looking to save, not illegal workers who compete with displaced American adults, all under the eyes of a surveillance-state that is selectively blind.

Source: The Economic Policy Institute

Notice how this divergence coincides with when the U.S. effectively went off the Gold Standard on August 15th, 1971. Fiat money hurts all but the very rich.